As a key advantage for Silver Thatch members, the plan gives you access to a range of actively managed investments that are typically restricted to institutional investors with large amounts of money to invest. More importantly, the cost of investing in the plan’s portfolios is generally much lower than you would find in the retail marketplace.
For the year ended June 30, 2012, the plan’s expense ratio was 1.09% (1.08% in 2011). This is the total of plan expenses expressed as a percentage of total assets. Plan expenses include the cost of administration and member services, as well as investment management fees. Because the plan’s large size translates into cost efficiencies and economies of scale, the investment management fees charged to the plan drop as the assets grow. This means that as the money in the plan gets larger, the fees gradually become a smaller percentage of the total assets – the more you save, the less it costs.
The investment management fees charged by most retail investment funds offered in the Cayman Islands can range from about 1% to 2% of net assets. Some fund managers may charge an additional annual performance fee of up to 20% of the gains in a fund’s net asset value. There may also be operational fees paid to administrators, custodians and other service providers. Add up these fees, and the total expense ratio for a retail investment fund can be 2% to 3% of net assets. The average expense ratio for retail investment funds in the U.S. is about 2%, while the average in Europe is about 1.5%.
Generally, any expense savings from lower fees go directly into boosting your investment returns. For example, a $100,000 investment with a 5% rate of return would save $500 annually based on fee savings of 0.5% (half of one percent). Over a 10-year time frame, the compounded value would mean more than $5,000 in savings.
The table below outlines the expense ratio for the funds offered under the available portfolios for the past three years.
Put low fees to work for you
Given the low expenses associated with investing in the Silver Thatch plan’s portfolios, making additional voluntary contributions (AVCs) in the plan can be an attractive place to add to your retirement savings – especially compared to a bank account or an investment account with higher fees. With Silver Thatch, there are no added account fees, or fees for account balances that are below a minimum threshold (for example, a minimum account value of $25,000). And there are no trading fees for moving money between portfolios. Most retail investment funds will charge a trading fee to sell units of one fund and invest the proceeds in another. For more information, contact: Saxon Pension Services at 1 (345) 943-7770, or firstname.lastname@example.org.